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NM Rothschilds predicts gold demand, price jump in 2001
Dinesh Parikh
Low supplies of fresh gold by 2001 is likely to contribute to a substantial jump of the global gold prices to around $305 per troy oz from the current sluggish levels of around $272-278 per troy oz.According to NM Rothschilds & Sons, one of the worlds oldest gold suppliers and financing entity, the current equations in the global market are likely to change substantiall by next year. This is primarily because of a marginal rise of just 0.7 per cent in the total gold mine supplies (including old gold scrap), against the jump in ovearll demand for gold by around 5.5 per cent by 2001. Executives of NM Rothschilds presented this global gold scenario at a global seminar on gold held in London recently. The presentation indicated that the supplies of mine gold by 2001 (including gold scrap but excluding the sales by the central banks) is expected to climb marginally to 3,211 tonnes from around 3,189 tonnes in 1999. Against this supplies, the demand is expected to jump to 4,167 tonnes from 3,952 tonnes in 1999. The overall gold supplies in the global market, however, is likely to be slightly higher by some 800 tonnes from the annual sales of 400 tonnes of gold by central banks of the developed world. Under the Washington Agreement (entered in late 1999), these banks have agreed to sell 400 tonnes of gold for next five years, aggregating to 2000 tonnes by 2004. Demand wherefrom: As regards rise in demand, observers say that this will arise from the following areas:
From the resurgent south east Asian economies
Demand following the rising incomes in the growing Indian economy. The rising demand for gold in India will be met more through channels other than the official ones n The new liberal gold import policy of China, expected to be announced early next year, is expected to help larger Chinese population to import gold following higher income levels of the mainland Chinese population. Observers feel, Chinese buyers of jewellery will swing to gold jewellery from current demand for platinum jewellery. This is because, import of platinum jewellery in China attracts lesser duties and fewer Governmental hurdles. Accordingly, the liberalised Chinese policies are expected to boost demand for gold jewellery.
More affluent middle eastern economies, following rewards from the historically high crude oil prices
Rise in demand from Turkey, which was last year affected by severe earthquake adversely affecting overall demand, including gold jewellery.
The overall demand for gold from the Asian economies will, however, depend on the extent to which these economies will go for gold as a storage and investment product. After the recovery from its recent low levels of economic activities (after 1997-98 debacle), these economies have begun returning to their pre-crisis-levels, prompting rise in demand for gold and gold jewellery.
It is interesting to know at this juncture that the Delaware-based Sunshine Mining and Refining Company is reported to have indicated recently that under its reorganizing efforts, it has filed for the bankruptcy laws under Chapter 11 of the US courts. Sunshine Mining was one of the important suppliers of gold in the global market.
The filing for the bankruptcy case by Sunshine Mining clearly indicates that there will be no gold supplies from this mining company hereafter.
Similarly, the gold supplies are likely to be lower from other mining companies as indicated earlier.Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.
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